[Investing] The Little Book of Common Sense Investing by John C. Bogle

I recently bought copy of The Little Book of Common Sense Investing by John C. Bogle. A 10th anniversary edition, updated and revised, may I add.

At the top of the cover is a review by the Oracle, Warrent Buffett:

"Rather than listen to the siren songs from investment managers, investors - large and small - should instead read Jack Bogle's The Litte Book of Common Sense Investing" 

That is it. Any investment book with the blessings from the Oracle himself must be a good book. You can also check out my reading list for the books I have read or am reading.

John C. Bogle is the founder and former chairman of the Vanguard Group. You may find the group a little familiar because it is indeed the Vanguard Group that manage the Vanguard 500 Index Fund. Warren Buffett had consistently backed investing in a low-cost index funds for everyday investors. This is easily validated by a simple Google search. Also, recently, Warren Buffett won a 10-year wager with a hedge fund manager; more about story here.

Back to the book. It is a little book, but it is also a thick one, a good 270 pages. It contains the rationale of behind investing in a low-cost and diversified index funds, and why it is a common sensical thing to do. The key take-away from the book I have is:

Participating in stocks investing is actually a loser's game. Whether profit or loss, the investment managers or brokers will always get a cut. Investors' earnings are eroding by transaction and management costs, and investing costs are exacerbated by transaction adn management costs. 

Only a low-cost and diversified index funds will allow an investor get his fair share of returns in the stock market, through capital appreication and dividends. 

There is also a chapter on Exchange Traded Fund (ETFs). Bogle warns against buying ETFs that are sector or industry specific and discouraged trading of ETFs.

So the investing principle is rather simple and straight forward (or common sense):

1. Invests in a low-cost and diversified index fund. 
2. ETFs that tracks a broad index (such as the Straits Times Index) is a good proxy. However do not trade the ETF.
3.  Hold for long position. Forever if possible.

If you are starting out in investing, this may be a good book to read. If you are a seasoned investor, maybe this book can give you some ideas too.

To me, index investing is an auto-pilot and simple way of investing. There is no need to pick stocks, read financial statements of the companies that are picked (unless you enjoy doing so, like I do). It is low cost and risks are minimized.

Remember to check out my reading lists. There are some reading recommendations too!

Feel free to air your comments!

~ZF